Accounting Concepts and Financial Reporting

This assignment delves into the importance of accounting concepts and their application in financial reporting. It discusses the relevance of measurement uncertainty, faithful representation, comparability, verifiability, timeliness, and understandability in enhancing qualitative characteristics of financial reporting. The assignment provides a detailed analysis of how companies exhibit these characteristics to provide fair and transparent financial information to stakeholders.

Contemporary issue in
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Objectives of General purpose financial reporting.............................................................1
2. Target audience of financial reports able to use accounting information..........................2
3. Recognition criteria for elements of financial statements..................................................2
4. Fundamental qualitative characteristics of financial reporting..........................................3
5. Enhancing qualitative characteristics of financial reporting..............................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Financial reporting provides information to users for assessing financial performance of
business and as such, effective decisions can be taken with much ease. Present report deals with
Newcrest Mining Ltd which is engaged in gold exploration and mining headquartered in
Australia and report discusses with reference to annual report of 2017 whether financial
reporting objectives and other aspects are complied with AASB or not. Thus, users may take
enhanced decisions. The stakeholders are benefited by such information and they are able to take
better decisions with much ease.
MAIN BODY
1. Objectives of General purpose financial reporting
The financial reporting provides useful information to users who have stake in the
business. They are able to take effective and enhanced decisions by assessing financial reports
imparted by the firm in the best possible manner. Furthermore, this report provides clarity to
users of accounting information to invest in the company or not. In relation to this, Newcrest
Mining Ltd which is engaged in mining sector. It is basically engaged in gold exploration and
mining organisation. It is required that objective of general purpose financial reporting should be
fulfilled by it in order to impart necessary information to recipients in effectual manner.
Newcrest Mining Ltd has effectively met financial reporting objectives. AASB (Australian
Accounting Standards Board) has provided concept of SAC (Statement of Accounting Concepts)
which imparts guidelines with regards to listing accounting information (Objective of General
Purpose Financial Reporting. 2015).
The objectives are to disclose financials of company such as assets and liabilities at the
end of reporting period, generating positive cash flows information, revenue earned and expenses
incurred at the end of period and thus, users may be able to allocate scarce resources. Sales
revenue of 2017 financial year is disclosed which is 3477 million. Total assets and total liabilities
are 11583 and 4049 are provided as well (Halligan, 2017). Moreover, there are positive cash
flows such as 439 in 2017. On the other hand, compliance is also made for occupational health
and safety legislation as it is the priority of organisation to provide safety to workers. Thus,
objectives are met by firm.
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2. Target audience of financial reports able to use accounting information
The target audience of the company are various users of financial information. They are
investors, creditors, customers, government, taxation authorities, employees and many other
stakeholders as well. They require financial statements of the company such as balance sheet,
income statement and cash flow statement. Furthermore, statement of changes of equity is also
essential part of financials of organisation. The stakeholders are able to take enhanced decision
by assessing accounting information in the best possible manner. It can be stated that Newcrest
Mining Ltd also provides relevant information to such target users (Kachelmeier, Schmidt and
Valentin, 2017).
Creditors are provided with the liquidity position of the organisation, while investors are
accompanied with revenue and net income of the firm. Government and taxation authorities are
provided by net profit made by firm by which they are able to calculate and assess tax liability of
the organisation quite effectually. Customers are provided with information of soundness of
business whether profits are generated by it or not. Thus, it can be said that Newcrest Mining Ltd
is providing information to all the parties to analyse organisation’s performance and further take
well-mannered decisions with much ease. Moreover, management and employees are also
stakeholders of company. Employees are able to take decision by assessing whether career
growth would be accomplished in the organisation or not. Thus, profitability aspect is judged by
them. Moreover, firm is engaged in mining and exploration and as such, employees also analyses
whether safety is provided or not Management analyses where decisions are to be taken to ensure
efficiency of various units to increase performance. Thus, company has provided all relevant
information to target audience.
3. Recognition criteria for elements of financial statements
The elements of financial statement are assets, liabilities, equity, revenues and
expenditures. It can be said that recognition of assets are that future economic benefits may be
derived out of the use of such assets (Kent and Zunker, 2017). AASB has provided guidelines in
SAC 4, further cost may be ascertained, and value may be derived of assets. It can be recognised
that total assets have been increased up to 11583 in 2017 year while it was 11191 in previous
year. Thus, economic benefit would be realised in the future. Furthermore, liabilities are reduced
which shows that Newcrest Mining Ltd is able to pay liabilities with much ease.
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Equity is the interest of owners and as such, assets should be maximised and liabilities to
minimised. Thus, there is increase in equity as it was 7120 in previous year and 7534 in 2017.
On the other hand, operating expenses have been realised and it can be analysed that they are
increased from previous year. Furthermore, sales revenue is also increased which shows future
benefits may be extracted by the company. Thus, recognition criteria are met for elements of
financial statements.
4. Fundamental qualitative characteristics of financial reporting
The fundamental qualitative characteristics are relevance and faithful representation.
Relevance means that financial information may be compared with past year and difference can
be analysed by the users. In relation to this, revenue of current year can be used for making
predictions for the future and past years’ performance may be compared as well. Newcrest
Mining Ltd revenue was 3295 in 2016 and it increased to 3477 which can be analysed by users
that performance is maximised and as such, more revenue will be achieved in the future.
Materiality concept means that company may ignore material items which will not impact
financial reports and users will not be misled (Russell, 2017).
Another aspect of relevance is measurement uncertainty which implies that if asset or
liability cannot be measured with certainty, then it should be estimated but it should be properly
estimated and disclosed. Faithful representation means that not only legal aspect should be
disclosed but also economic information should also be disclosed and that too free from errors.
Thus, company has exhibited these characteristics of financial reporting.
5. Enhancing qualitative characteristics of financial reporting
The enhancing characteristics are comparability, verifiability, timeliness and
understandability. Comparability means that information may be compared of one entity by
another in similar organisation by the users. For instance, if investors want to invest in
organisation, then he can seek dividend payout ratio of Newcrest Mining Ltd with other
company and as such, comparison can be made and thereby decisions are taken. Verifiability
means that financial information can be verified by users such as if inventory is to be valued by
taking costs and methods; same amount should be ascertained of what is listed in financials.
Timeliness means that updated information should be provided by company as older
information is less useful for taking decisions (Muñoz, Bolívar and Hernández, 2017). Thus, firm
provides information at the end of reporting period to stakeholders. Understandability means that
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information should be concise and easily understandable by the users. Thus, these enhancing
qualitative characteristics of financial reporting have been exhibited by organisation in effectual
manner.
CONCLUSION
Hereby it can be concluded that accounting concepts and rules are quite relevant to firm
for exhibiting fair financials in the best possible manner. Financial reporting should be prepared
by complying with standards and guidelines provided by professional accounting bodies in order
to have fair view of financial information to users. Thus, true financial report provides clarity to
business and as such, trust of users also enhances in a better way.
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REFERENCES
Books and Journals
Alcaide Muñoz, L., Rodríguez Bolívar, M. P. and López Hernández, A. M., 2017. Transparency
in governments: a meta-analytic review of incentives for digital versus hard-copy public
financial disclosures. The American Review of Public Administration. 47(5). pp.550-573.
Halligan, J., 2017. Reform design and performance in Australia and New Zealand.
In Transcending New Public Management (pp. 55-76). Routledge.
Kachelmeier, S. J., Schmidt, J. J. and Valentine, K., 2017. The disclaimer effect of disclosing
critical audit matters in the auditor’s report.
Kent, P. and Zunker, T., 2017. A stakeholder analysis of employee disclosures in annual
reports. Accounting & Finance. 57(2). pp.533-563.
Russell, M., 2017. Management incentives to recognise intangible assets. Accounting &
Finance. 57(S1). pp.211-234.
Online
Objective of General Purpose Financial Reporting. 2015 [PDF] Available Through:
<http://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf >
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